Monetary Policy, Advance Tax Numbers to set the tone for Indian Markets - Eastern Financiers

After a firm week of trade, markets are expected to consolidate, trading within a range, as it awaits the crucial monetary policy announcement next week. Also, all eyes would be on the US Federal Reserve's meet as regards to any announcement on the timing and quantum of the cut back in the ongoing monetary stimulus package. On the macro front, investors would be keenly watching the WPI numbers that would be announced early next week, to gauge the possibilities of a rate cut in the RBI's policy meet that follows. The movement in the Indian rupee would also be another crucial factor determining the market trajectory next week. Although some steps in the right direction on the part of both the Government and the RBI has helped the rupee gain some ground, yet, the next week's big ticket announcements both at the domestic and global fronts would determine the fate of the rupee. FII flows, that are the life-blood of emerging markets like us would be another important determinant of market movement in the week to come. Apart from these, Q2FY14 advance tax numbers and movement in the commodity prices, especially crude, would also be watched out by market participants.

The Coming week would be starting with the all important inflation gauge at the wholesale level WPI- being announced at the beginning of the week. The recent mellowing trend in the retail inflation has evoked enthusiasm amongst market participants that the spike in WPI in the previous month was a one-off incidence and inflation at the wholesale level would also pleasantly surprise the markets. Apart from the CPI numbers that indicated lower prices, another important indication came in the manufacturing PMI survey. It showed that input costs rose last month at their slowest pace in over four years, thus re-enforcing the fact that the inflationary pressure might continue receding going forward.

One of the principal mover events for this week would be the RBI's policy scheduled to be announced on September-20. Although, there are sufficient indications that sluggish growth and lowering inflation is here to stay unless policy actions in the form of rate cuts are made, yet, the still-large deficit figure and weaker currency keeps upward risks to inflation alive and makes rate cut a distant possibility as off now.

Global events would take centre-stage this week as all eyes are on the Fed's next meeting. Market participants are divided as to whether the Fed would start tapering its $85-billion-a month bond-buying program that has helped support the economy for the past year. If it chooses to do so in this meeting, it might induce volatility in the global markets, including ours. Along-with the Fed meet, there are a whole host of important data points slated to get announced in the week to come. This includes US Industrial production, EU CPI, German Zew economic sentiment, US CPI, US Housing starts, UK retail sales, US existing home sales, etc.

Source : Equity Bulls

Keywords